Citi are pushing that fateful day back:
We have held the view, since May 2012, that a Greek exit from the euro area (“Grexit”) in the next 12 to 18 months is a high-probability event (90%) which we assume, for the sake of argument, would happen on January 1 2013. We are now cutting the probability of Grexit over the next 12-18 months to 60% and judge that this event will probably happen later than we previously thought, most likely in 1H 2014.
A cynic might suggest they were getting the jitters as deadline approached but lets hear them out (our emphasis). Read more
Here’s the running order for Angela Merkel’s
last? visit to Athens. Graphic courtesy of Bild.
Look, look: it’s Target2 imbalances… rebalancing… slightly.
What’s the justification for creating a three-ring security circus in the Greek capital, a general strike and quite possibly a major riot? Read more
If you think Germany’s response to the crisis has been less than lightning swift so far…
JP Morgan’s Alex White argues that the German policy motor may be about to properly slow down, and with it the response to the eurozone crisis which usually moves at Germany’s speed: Read more
Germany business sentiment fell again in September, from 102.3 to 101.4, marking its fifth succesive month of contraction. The roughly 7,000 companies surveyed by the Ifo institute were also increasingly pessimistic about their futures… which doesn’t bode well for everyone else’s.
Forecasts had been for a slight increase in the index but, with typically sharp turnaround speed, our inboxes now expect a recession. Capital Economics said the expectations index in particular, down from 94.2 to 93.2, indicates an annual fall in GDP of nearly 1 per cent: Read more
Poor Jens Weidmann.
After weeks of macro-economic sniping following his isolation at the European Central Bank over its new bond-buying policy, Jens Weidmann on Tuesday resorted to Goethe’s Faust to make his point. The classic play highlighted, he argued, “the core problem of today’s paper money-based monetary policy” and the “potentially dangerous correlation of paper money creation, state financing and inflation”. Read more
Would you like three long, dense paragraphs of German legal rumination on a idea that’s already DOA? That’d be the ESM funding itself through European Central Bank liquidity.
Of course you would (and if not, you can always skip to the analysis below): Read more
German finance minister Wolfgang Schaeuble was addressing the Bundestag on Tuesday…
BFW 09/11 08:28 Schaeuble Says Greece Has Undertaken ‘Impressive’ Steps
BFW 09/11 08:26 Schaeuble Says ECB’s Independence Must Be Defended, Respected
BFW 09/11 08:18 Schaeuble Says Euro Crisis ‘Not Over,’ Be Around for Months
BN 09/11 09:08 *SCHAEUBLE SAYS GERMANY AGAINST `DEBT UNION, EURO BONDS’
BN 09/11 09:07 *SCHAEUBLE: GERMANY SHOWS GROWTH, CONSOLIDATION NO CONTRADICTION
BN 09/11 09:05 *SCHAEUBLE SAYS GERMANY UNLIKELY TO BEAT 1.6% GROWTH 2013
BN 09/11 09:04 *SCHAEUBLE SAYS GERMANY TO AT LEAST MEET 2012 BORROWING TARGET
BN 09/11 08:36 *SCHAEUBLE: GERMANY WILL EXCEED DEBT BRAKE REQUIREMENTS BY FAR
BN 09/11 08:35 *SCHAEUBLE SAYS GERMANY DETERMINED TO CUT NEW BORROWING
BN 09/11 08:33 *SCHAEUBLE SAYS GERMAN 2012 0.7% GROWTH FORECAST WELL SUPPORTED
BN 09/11 08:31 *SCHAEUBLE: FUTURE ESM BANK RECAPS MUST BE REQUESTED BY STATES
BN 09/11 08:31 *SCHAEUBLE: UNREALISTIC TO HAVE SUPERVISION OF 6,000 BANKS SOON
BN 09/11 08:26 *SCHAEUBLE SAYS EUROPE HAS LEARNED FROM ITS CRISIS
BN 09/11 08:25 *SCHAEUBLE SAYS STABILITY AND GROWTH PACT HAS `MORE TEETH’ NOW
BN 09/11 08:25 *SCHAEUBLE SAYS `WE’RE ON THE RIGHT TRACK’ IN THE EURO REGION
BN 09/11 08:25 *SCHAEUBLE SAYS ITALY, SPAIN HAVE MADE CONSIDERABLE PROGRESS
BN 09/11 08:24 *SCHAEUBLE SAYS GREECE PROGRAM CONDITIONS CAN’T BE RENEGOTIATED
BN 09/11 08:24 *SCHAEUBLE SAYS GREECE MUST MEET ALL PROGRAM CONDITIONS
BN 09/11 08:24 *SCHAEUBLE SAYS PORTUGAL FIGURES SHOW REFORMS TAKING HOLD
BN 09/11 08:23 *SCHAEUBLE SAYS GERMAN PARLIAMENT MUST BACK NEW AID PROGRAMS
BN 09/11 08:21 *SCHAEUBLE SAYS ECB’S INDEPENDENCE MUST BE DEFENDED, RESPECTED
BN 09/11 08:21 *SCHAEUBLE: SHARED LIABILITY, PRINTING PRESS WON’T SOLVE WOES
BN 09/11 08:21 *SCHAEUBLE SAYS THERE WON’T BE ONE BIG BANG TO SOLVE CRISIS
BN 09/11 08:20 *SCHAEUBLE SAYS GERMANY UNLIKELY TO SEE STRONG UNEMPLOYEMNT GAIN
BN 09/11 08:17 *SCHAEUBLE: GERMANY BETTER ADJUSTED TO GLOBALIZATION THAN OTHERS
BN 09/11 08:16 *SCHAEUBLE SAYS GERMANY HAS BECOME MORE RESILIENT TO SHOCKS
BN 09/11 08:14 *SCHAEUBLE SAYS GERMAN ECONOMY’S EXPANSION IS SLOWING
BN 09/11 08:13 *SCHAEUBLE SAYS EURO CRISIS `NOT OVER,’ BE AROUND FOR MONTHS
BN 09/11 08:12 *GERMAN FINANCE MINISTER SCHAEUBLE SPEAKING IN GERMAN PARLIAMENT
BN 09/11 08:12 *SCHAEUBLE SAYS ECONOMIC SITUATION OVERSHADOWED BY EURO CRISIS Read more
From Reuters earlier on Tuesday:
Germany’s constitutional court said on Tuesday it would not postpone its long-awaited ruling on the legality of the euro zone’s bailout fund despite a new legal challenge by a eurosceptic lawmaker. Read more
There are two fairly important bits to this story in Der Spiegel.
One, that Merkel wants to avoid a Grexit for the time being and two, that the upcoming Troika report might be massaged to make that a reality. Read more
Let’s start on a positive note on the volley of Markit PMI released Monday.
Spain’s PMI rose during August to 44, versus 42.3 in July… Read more
Here’s a call from Sober Look on Tuesday — Germany’s growth might be on the cusp of going negative:
So much for the hopes and dreams of German decoupling from the Eurozone’s economic troubles. How things have changed in just six months… Germany’s growth trajectory is now converging with the rest of the euro area’s weakened economic conditions. Read more
Ahead of Greek PM Antonis Samaras’ meeting with Angela Merkel on Friday we thought a look at Germany’s cast and position might be worthwhile… especially since the Greek leader is set to pitch for a two-year extension to meet fiscal targets set out in the loan agreement at that meeting.
As the FT notes: Read more
Here’s an interesting exercise in eurozone sovereign credit, courtesy of Francesco Garzarelli of Goldman — click charts to enlarge:
A grainy picture of some central bankers. A warning in German that “it is immensely amateurish to renounce this mechanism.”
Finland is a rare stable Aaa-rated credit in the eurozone, according to the ratings agency, which placed Germany, the Netherlands and Luxembourg on a negative outlook.
Possible contingent liabilities from rescuing Spain and/or Italy loomed large. Read more
That’s Germany at the bottom, Italy in the middle and Spain going basically flat from 3-year out (click to enlarge):
That’s one unhappy Minister-President of Bavaria venting on Tuesday. Read more
Admittedly the words Karlsruhe and German and constitutional court lack any sex factor, but the relative lack of attention the case is getting seems a bit odd to us given what’s at stake. We’d expect the markets to be just a bit more het up about it.
So would Martin Lueck, an economist at UBS, who argues in his latest note that too many investors don’t understand the situation and are just assuming that the court will yield to the markets’/politicians’ pressure and let ratification of the ESM and fiscal compact pass: Read more
Nomura’s Richard Koo has written a fascinating account of his meeting with “a number of influential politicians, academics, and senior government officials” in Berlin last week.
First, he heard that some Germans don’t think Greece should have ever been admitted to the eurozone. One of them even said Greece was not really a modern nation-state, Koo writes. Another politician/academic/official was more positive, saying both Greece and Ireland had become more competitive of late, as wages and prices had fallen. Read more
Click through the pic to the full IMF report on country x to find out. (p. 17)
Calculating the benefit to Germany from eurozone membership has been attempted numerous times, and proven rather hard to pin down. But what about the opposite? The costs to the country of a euro break-up? Given the importance of Germany’s support to the survival of the euro project, this is a big question, with a tonne of political baggage attached.
The German ministry of finance has done just such an analysis, according to Der Spiegel, and found that the costs of such a break-up and the re-introduction of the D-Mark would lead to an up to 10 per cent fall in GDP in the first year. Unemployment would surge to its record high of over 5m. Read more
We take our headline from Sharon Bowles MEP.
The Member of the European Parliament was talking to Public Service Europe about this ominous move in transparent sovereign accounting: Read more
It’s an understatement to say that the last couple of years haven’t been great for Greco-Germanic relations.
On Friday night, however, the eurozone’s strongest and weakest nation get to fight it out – on the football pitch. They are through to the quarter-finals of the Euro2012 championships. With everything that’s happened, it’s hard to ignore the political overtones to the match. Read more
Germany’s Zew index has suffered its worst decline in 13 years and while it has never been a perfect indicator this level of decline doesn’t bode well for Germany’s future prospects. This is from the Zew Center for Economic Research (with our emphasis):
The ZEW Indicator of Economic Sentiment for Germany has decreased by 27.7 points to a level of minus 16.9 points in June 2012. This is the indicator’s strongest decline since October 1998. The worsening of the situation in the Spanish banking sector and the insecurity about the outcome of the Greek general election, which had been lasting for most of the survey period, are likely to have contributed to the sharp decline of the indicator. Read more
How Charles Dumas of Lombard Street Research gets from this poor performance in Dutch retail sales recently…
Spain’s government has been left looking increasingly desperate/reckless/ineffective by its plans to rescue Bankia, as today’s FT describes:
Mr Rajoy and his government are facing growing domestic criticism over repeated errors of strategy and communication, which that have given an impression that Madrid has run out of ideas on how to handle its financial and economic crises. Read more
Nomura’s Richard Koo is kinda with Christine Lagarde when it comes to the Greek tax problem.
But eurozone bonds (aka eurobonds) are not the solution, he says. Firstly, Greece needs to address its mutual distrust problem with Germany, and persuade the Germans that it will get serious about this tax collection thing: Read more
In the (relative) absence of news, we should share this tweet from @presseurop